Half of hedge funds now sell products traditionally the preserve of mainstream asset managers such as "long-only" strategies, a study shows, reflecting how conservative investors have come to dominate the industry's client base.
Hedge funds have made their name wagering on asset prices both rising and falling, and often increase the risk of their bets with borrowed cash. By contrast, traditional long-only managers can only bet the price of a stock or bond will go up.
But many hedge funds are now branching out into long-only products in an effort to diversify and expand their business, putting them in direct competition with fund managers like Schroders, Standard Life and Pimco.
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This shift underlines how more risk-averse investors, which tend to put most of their money in traditional assets such as bonds and stocks, are seen as representing the industry's best source of future growth, encouraging managers to curtail the free-wheeling ways of the past.
According to the study, conducted by Deutsche Bank, half of hedge funds now offer non-traditional hedge fund products such as long-only mandates and "liquid alternatives", which restrict the size of fees funds can charge.
Well-known firms including Lansdowne Partners, Egerton Capital and Winton Capital are among those offering long-only funds, and according to the study it is the larger managers that are leading the shift.
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More than four in five managers running more than $5 billion in assets have launched at least one non-traditional hedge fund strategy, the survey said.
The study polled 60 global hedge funds running $528 billion in assets and 200 investors managing more than $625 billion in hedge fund assets, Deutsche Bank said.